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European Insurance and Occupational Pensions Authority

Interview with European Pensions conducted by Jack Gray


Publication date
20 February 2023


How have your first 18 months as chair of EIOPA been?

It’s been exciting and it’s a wonderful job that it is meaningful to me, there is a quiet pleasure in enjoying your work. After over a year I have a base on which to lean; I’ve been through the first cycle, and I’m more aware of all of the issues and different meetings. In the beginning there was lots of excitement because everything was new. The energy is still very good, but I think it’s getting more focused. It’s a really good feeling to serve society to the best I can, and I think that’s an additional value to the job.

What were your main targets when coming into the role?

Top of my list was a responsibility as a female in this role to support diversity, and more than just in gender. Simply being in this position and having a broader audience was not just an ambition but a responsibility. Women should help women, but also we should fight for diversity in general. Secondly, I wanted to build the authority up further, and finally I wanted to address gaps, such as the protection and pension gaps. Coming from a country in the Netherlands where citizens are so used to having a pension. But then if you look at the EU in general there is still 20 per cent of people who are at risk of poverty in old age. In Europe we need to make sure that these numbers go down.

What are your goals for the next 18 months?

First of all, there is monitoring of the market. We are still in a challenging macroeconomic environment and that needs careful monitoring, particularly the impact of inflation. In real terms, for both defined benefit and defined contribution schemes, it’s hard to reach the high values that you want to achieve as an IORP for your members and that’s something for us to monitor. In general, the move to high yield that is happening in the market is positive, but the road towards that can be bumpy. The protection gap is also something we want to address, and again diversity.

Naturally sustainability and digitalisation are very high on the agenda, and pension funds as long-term investors have a key role to play there. They also have a responsibility not just as an investor but towards their consumers who have preferences and needs.

Then you have the digital future where the occupational pension fund market has possibilities in how they reach their consumers. We’ve produced some pieces of advice where we explain how countries can set up a pension dashboard at the macro level to show where the gaps are, but also at a micro level so citizens can go online and see how much pension they can expect. This advice is sitting in Brussels now and there is not a lot happening to it. The starting point of addressing gaps is to know where they are and these are tools that could be really useful.

Looking at monitoring the market, data will be key. Also we will be monitoring the move from defined benefit to defined contribution and what that means for consumers, especially in a time of high inflation. We are also building a risk dashboard specifically for IORPs. The ambition is to feed that back in sets of information that are relevant to their markets.

On the sustainability side, it will be important to assess what the risks are, particularly transition risks and how pension funds can cope with this. Climate stress tests will be an important part of that. There is an important one coming up at the end of this year and beginning of next year where we will do a joint stress test with the ECB, EBA and ESMA of the entire financial market and its sensitivity to transition risks that are coming with the proposals of the European Commission on renewable sustainable finance.

The implementation of the Digital Operational Resilience Act is going to be a key challenge. We do that with the EBA and ESMA. We hope that will bring some benefits for the industry, including IORPs.

Then we have the IORP II Directive review. Sustainability will be key and the main topic to discuss when it comes to IORPs and sustainability; we want to say something in our advice on the IORP II Directive that we are drafting on how that works with fiduciary duty and the wishes of consumers to have green investments. Then, greenwashing, which is broader than just pension funds, but it will be important. With that you get to the other two topics that will be important in the IORP II review: How do we inform pension fund members, and what will digitisation bring? Part of our potential focus will shift a bit from prudential to conduct: Value for money, how it is offered, why it is taken, does it match with the expectations, etc. Products have to be consumer centric; we will make sure we look at this. Finally, cross-border IORPs. I think we all know that the market there has not taken off yet. Neither has PEPP so far, with only two registrations at the moment.

Overall, in the review we want to keep things fit for purpose, to address some of the areas that are not working. We need to reflect the shift from defined benefit to defined contribution and the need for consumer protection. We are amazed that in the banking regulation the requirement for gender diversity in boards is included, but this is completely absent from IORP II. For us, that is not acceptable. I’m sometimes amazed by the pushback I get on this.

What have you found most challenging about being EIOPA chairperson?

Overall I think I was really blessed, as a previous DNB employee I have been involved with EIOPA and IORPs since 2008, and I know many of the people. A big challenge was COVID-19. Here in the state of Hessen in Germany, the mandatory home working lasted until the end of March 2022. On the one hand it was nice, because when doing engagements you had a bit of control on the length of discussions. However, having to do everything virtually was a challenge. There was an enormous willingness to get me up to speed, and that was very helpful. I felt part of the EIOPA family, but it’s much better to have everyone back in the office. What you need is ideas and a feel for what is out there, and that was something of a learning curve. In the past year, I’ve learnt so much about all the member states and that is key in pensions, because they are all different. This also explains the lack of harmonisation with the IORP II Directive, just to reflect the diversity of members.

I didn’t think it was going to be difficult, I realised it was going to be a lot; and it is a lot. Both in terms of how many people want to reach out to you and making choices. Fortunately, I have a great team and I can get support from other people. A big challenge was that I used to be a national supervisor; I’m used to having national powers. At EIOPA, you are a supervisory authority, and you can step in, but you are not a national supervisor. Now I have to talk to national supervisors, and sometimes they do things and sometimes they don’t. I had to get used to that.

How well do you feel European pension schemes coped with COVID-19 pandemic, and what are the key challenges will face over the next year?

Pension funds went through COVID-19 fairly well and they recovered afterwards. The next crisis was the sanctions because of the unprovoked war in Ukraine. There was hardly any impact on the IORPs in Europe. The outlook challenge will be getting the regular work done and monitoring that we don’t have any accidents. After the LDI crisis in the UK, we immediately looked into our European market and the extent to which this could happen in Europe. What is helpful is we have the data that indicate where we are. We have much more diversified market in Europe as we have multiple currencies, we have less investment in LDI and it’s also a much more liquid market. However, it could still be a risk if markets start to move in this way so quickly.

Do you have any words of advice for pension professionals reading this to ensure they are meeting EIOPA's expectations?

The first thing is that we are in need of a sustainable transition, and pension funds can play a very positive role here. We all need to accept that it’s a transition and green finance is not about being green, it’s about becoming green. We need to think about how we can do that, keeping in mind that not every investment might be green but could be motivated towards being green through stewardship. Secondly, keep an eye on your members and their preferences. Embrace the digital tools to understand what they are and how you can communicate with them. Do not go for the commercial green choice if you are not completely sure, but if you are sure you are sure. Because we are at the start I would not be surprised by low numbers, but I would be concerned if then numbers did not go up.

What is your opinion on how the climate stress tests went at the end of last year?

Stress test scenarios are there to understand the risks, and for that it was very helpful. I’m fine with the response of the market, but let’s be frank, it did provoke a sizeable drop in assets of 12.9 per cent. It showed that there is a sensitivity to the transition. Those who thought the sensitivity was less than expected still need to do a lot because there is still quite a gap to cover. As long as it helped to understand the size of the action needed and it’s doable, because it’s not as big as we thought, then it’s a positive signal. If it signalled that ‘it’s not as bad we thought, continue as usual’, that would be a bad appreciation of what we tried to communicate. It shows that its very much there, it’s not small, but it's a size that we can manage if we start acting today, and that’s the key message. A lot still needs to happen, and the financial industry can not deliver the transition on its own. But it is in a position to play a positive role by setting an example and by doing it.


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